EURUSD sell-off targets 1.13500

The EURUSD pair is now pushed higher by a recent shift in the Federal Reserve’s (Fed) monetary expectations. The August 7 labor market report came in well below forecasts. In July, US employment figures fell by 23,000, while traders had projected an increase of around 83,000. To make matters worse, the previous months’ data were revised downward, raising serious concerns about a slowdown in the American economy and reducing the probability of further policy tightening. Of course, the dollar was under pressure due to these developments, allowing EURUSD to settle above 1.15000.

However, the market’s attention is now turning to inflation. The July Consumer Price Index (CPI) is due today, August 12, and this report is likely to shape September’s monetary expectations in the United States. Preliminary estimates point to a slowdown in year-over-year inflation from 3.5% to 3.4%, with the core reading anticipated at 2.5%. Weaker statistics could reinforce the Fed’s dovish tone, weighing on the dollar. However, if the core CPI exceeds forecasts, investors will have little choice but to price in a rate hike—potentially triggering a correction in the pair.

Now, let’s take a closer look at the eurozone’s fundamental landscape, which looks rather mixed. At its previous meeting, the European Central Bank (ECB) kept borrowing costs unchanged at 2.25%, emphasizing that further decisions will depend solely on incoming economic data. So, where does this leave us? The Fed-ECB rate gap remains significant, though it could narrow if the American central bank pivots dovish while its European counterpart holds steady.

From a technical standpoint, EURUSD failed to break through the 1.15850 resistance level, pulled back, and headed lower. The next potential stop could be a 1.5-year bottom of 1.13500—a key support zone.

The final recommendation:

— Sell EURUSD at the current price (1.15350), aiming for 1.13500 within two weeks.

— Place Stop Loss at 1.15850 to manage risks if the pair moves against us.